Tag Archives: spending cuts

A Brief Comment on the “Bonfire of the Quangos”

Quangos have a bad reputation, something which I think is due, to a large extent, on the name, which sounds woolly and bureaucratic before anyone actually considers what they do. I don’t want to launch into a full-scale defence of quangos – I don’t know enough about them individually to comment. This is the inherent problem here. One quango runs British Waterways, the network of canals across the country, while another monitors the use of legal aid. To bundle them together is utterly meaningless.

My concern about the report today which abolishes a large number of quangos is that the government has failed to properly make the distinction either. The argument used by Francis Maude for the scrapping of 192 quangos is that they are not properly accountable.

The problem with this “accountability” line is that it is essentially nonsense. If a quango’s functions are rolled into a ministerial department, how does that make it more accountable to individuals? Are the people who live in that minister’s constituency going to say “Well, the work done by the Renewable Fuels Agency, under his department, hasn’t been up to much, I think I’ll vote Green”. We certainly can’t get a situation where the heads of these bodies are directly elected, since most functions of quangos are essentially non-political.

I am actually all in favour of expert bodies, outside government, being responsible for specific areas of activity where appropriate. As long as the work is important, I’d much rather it was done by people who know what they are doing than being notionally “accountable”.

Scrap useless bodies of course, but bringing things under ministerial control and basing this review on “accountability” is ridiculous. Michael Gove can’t get a list of schools right, why on earth would we want additional important responsibilities falling to him?

I think the accountability approach is most likely a cover for more ideological cuts to services which people already think are wasteful, despite not really understanding what they are. It’s an easy target and like most easy targets, there are usually much more difficult consequences not far behind.


Filed under Coalition, Economy

Against All of My Instincts, I’m Leaning Towards Ed Balls

When the leadership campaign began, I knew one thing – I definitely wouldn’t be voting for Ed Balls. Now, having read his speech at Bloomberg this week and analysed the reaction (in particular from the Financial Times), I am starting to think he offers the most coherent response to the most important issue of this parliament – the spending cuts.

Ed laid out a Keynesian vision for growth, which as I’ve argued again and again, is the only genuine way to reduce the deficit without causing serious and lasting structural damage to the economy which could last a generation.Some commentators have suggested that Balls is taking a risky approach by nailing colours to a mast which may prove to be unfounded. I don’t accept this.

I don’t think the thrust of Ed Balls’ argument is “take my approach or face calamity”. He has laid out a viable and impressive alternative economic vision which has the weight of history behind it and allows for a more socially responsible approach to the deficit. What Labour does with Balls’ analysis is what’s important. It is not necessary to use the politics (or economics) of fear which has driven the coalition’s public approach to the deficit. With a reasoned and supported economic argument behind him, Balls has opened the door to new way of challenging the cuts agenda.

The media has bought wholesale the need for cuts to reduce the deficit and the question now is where the pain should fall. Balls is tackling the premise behind this. Labour can never win public support if they simply challenge where the cuts should happen – they will appear sniping and incoherent. An alternative (quasi-Keynesian) vision for economic recovery based on investment, fair tax rises and, yes, some spending cuts gives Labour a platform to challenge the underlying assumption which currently gives the coalition the opportunity to ideologically cut at will.

In the end, it doesn’t matter whether the worst downside of the austerity drive comes to pass, with Balls’ vision, there exists an alternative idea to hold up to people and say “Even though we avoided a violent double-dip, we could have tackled the deficit in a much fairer way.” There is nothing at all wrong in basing Labour’s approach on Balls’ view, because it has intellectual weight regardless of the outcome of the coalition’s actions. Put simply, the recovery is not black and white and even if the coalition don’t fail utterly, a viable alternative can retain credibility. I think the risk to Labour is in failing to have an economic vision which underpins Labour’s opposition, rather than worrying about being notionally “wrong”.

For this reason, with my ballot still uncast, I find my pen hovering above Ed Balls’ name for the first time. It’s not something I thought would happen, but if nothing else, it’s proved the value of the context in drawing out what’s important in our new leader.


Filed under Economy, Labour Party, Leadership Election

Labour Must Find a Clear Message on the Economy

A new day, a new cut announced and the same failings from the Labour Party to challenge the Tory’s position with a coherent message. There is a very real threat that the economic debate is being lost without ever really being held. The leadership election is becoming a distraction. Labour needs a strong team in place to put the counter-argument to the ideologically-driven austerity of the coalition, and the endless hustings, although helpful in their way, are leaving us behind.

The frustration is that the counter argument does exist and some very serious economists are making it. Nobel Prize winners Joseph Stiglitz and Paul Krugman both have issued stark warnings about the dangers of government contraction at a time of depressed global demand. Excessive retrenchment now, when export markets are weak and local demand low, will force businesses under and push more people out of work. Increased unemployment leads to lower tax revenues and higher benefit and social costs. Stagnant growth means lower corporation tax take and a deficit which, regardless of how hard you cut spending, will never be properly controlled.

I don’t expect everyone to agree with this view. However, it is a valid and serious perspective. It supports the left’s view that governments exist to help in times of trouble. When the economy, here and abroad, is stable and growing, then withdraw the spending. Benefit costs will fall anyway as more people get into work. Some spending can certainly be lost with minimum impact, especially if the private sector is strong enough to take up the labour slack. The deficit and the debt can be managed down as growth increases. It’s a sensible, viable and economically-literate response to small state, free market Thatcherite economics. And it’s a message we need to be delivering now, again and again, in a unified way.

So, Ed Balls, Ed Miliband, David Miliband, Diane Abbott, Andy Burnham, Alan Johnson and anyone else who may crop up on TV and be asked by a Tory / Lib Dem “Well, what would you do?”, or “Well you would be doing exactly the same”, feel free to use this:

“Our approach is different. We agree with the Nobel economists who say growth is the best route to reducing the deficit. Cutting projects like Building Schools for the Future not only harms the children, it harms the private businesses who rely on this work to survive.

Savage cuts now, when there is no demand in the economy and our export markets are depressed, leave private business with nowhere to turn. You are not just cutting public sector waste, you are hitting the private businesses who supply our vital public services.

If these businesses go under, unemployment goes up, which, as Mrs Thatcher discovered, is a very expensive problem to deal with. Higher benefit spending and lower taxes, plus less money for people to spend in the shops.

We want to tackle the deficit – halve it by 2015 – but cutting now in such an excessive way, driven by an ideological desire to hammer the state will kill recovery.

We have a duty to support businesses and people, until the recovery, here and abroad is secure. Then we will see the deficit fall as tax revenues grow and people start to spend.

That is the time to make cuts, and make them in a fair way. Ensure tax rises fall on those most able to pay, unlike VAT. Make the banks pay a sensible amount back to society.

Cutting now risks a prolonged depression and the deficit will never fall. We would offer support now and make cuts later, when the economy is growing again. Yes, those cuts will be tough, but they’ll be against a backdrop of an economy on the up and they can be made in such a way as to protect the poorest in our society.

It’s simply untrue to say there is no choice in this. There is a clear choice – growth, jobs and a sensible plan to reduce the deficit, or ideological cuts which ignore the global economic climate. Yet again, the Tories are making the wrong call.”


Filed under Coalition, Economy, General, Labour Party